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In July, the third time this year, the Pending Home Sales Index crossed its benchmark value of 100, moving to 101.7.

A “pending home sale” is a home under contract to sell, but not yet sold. Data for the index is collected by the National Association of REALTORS® and published monthly.

The rise in July’s Pending Home Sales Index reading is important for two reasons — both of which highlight a U.S. housing market in recovery. Buyer and sellers in Mesa and across the country would do well to pay attention.

First, the Pending Home Sales Index is at its highest point since April 2010, the last month of that year’s federal home buyer tax credit.

From this, we can infer that the rate at which homes are selling in Arizona and nationwide is approaching the same “stimulated” levels that the tax credit afforded two-plus years ago. The difference is that today there are no buyer tax incentives.

The Pending Home Sales Index readings have climbed steadily since the tax credit’s expiration, too :

July 2010 : 78.4 reading

July 2011 : 90.5 reading

July 2012 : 101.7 reading

Second, because the Pending Home Sales Index is a relative index; and, because it was assigned a value of 100 when it was launched by the real estate trade group in 2001, when the PHSI reads higher than 100, it tells us that homes are going under contract at a faster pace than they did during the index’s first year.

2001 was a strong year for the U.S. housing market. 2012 is on path to be a stronger one.

80% of homes go to closing within two months of contract so, based on the July 2012 Pending Home Sales Index, we should expect for the Existing Home Sales report to rise through the rest of summer and into fall. Home supplies may drop and home prices may rise.

The housing market has expanded slowly and steadily dating to October 2011. Based on last month’s PHSI, that momentum will continue.

According to the Federal Housing Finance Agency’s Home Price Index, home prices rose by a seasonally-adjusted 0.7 percent between May and June 2012. The index is now up 3.0% over the past 12 months, and made its biggest quarterly gain since 2005 last quarter.

The FHFA’s Home Price Index measures home price changes through successive home sales for homes whose mortgages are backed by Fannie Mae or Freddie Mac, and for which the property type is categorized as a “single-family residence”.

Condominiums, multi-unit homes and homes with jumbo mortgages, for example, are excluded from the Home Price Index, as are all-cash home sales.

June’s HPI gives buyers and seller in Mesa reason to cheer, but it’s important to remember that the Home Price Index — like so many other home valuation trackers — has a severe, built-in flaw. The HPI uses aged data. It’s nearly September, yet we’re talking numbers from June.

Data that’s two months old has limited meaning in today’s housing market. It’s reflective of the housing market as it looked in the past.

And, even then, to categorize the HPI as “two months old” may be a stretch. Because it often takes 45-60 days to close on a home sale, the home sale prices as reported by the July Home Price Index are the result of purchase contracts written from as far back as February 2012.

Buyers and sellers in search of real-time home price data, in other words, won’t get it from the FHFA.

The Home Price Index is a useful housing market gauge for law-makers and economists. It highlights long-term trends in housing which can assist in allocating resources to a particular policy or project. For home buyers and sellers throughout AZ , however, it’s decidedly less useful. Real-time data is what’s most important.

Mortgage markets improved last week. Mixed data highlighted the U.S. economy’s slow, steady expansion; the Federal Reserve changed market expectations for the new stimulus; and, sovereign debt concerns moved back to the forefront in Europe.

Conforming mortgage rates fell last week for the first time this month, breaking a 4-week losing streak that had stymied would-be refinancing households in CA and nationwide.

Mortgage rates had been higher since the start of August.

In published minutes from its July 31-August 1, 2012 Federal Open Market Committee meeting, the Federal Reserve revealed that, absent “substantial and sustainable” economic growth, many of its members believe further monetary easing would be warranted.

Recent data shows that growth may be sustainable, but it’s hardly substantial.

Job growth is higher in 22 straight months, but averaging less than 100,000 net new jobs per month over the past three months

Housing data shows a steady home sales growth, but a dwindling home inventory of new homes and home resales

GDP grew 1.5% in Q2 2012, down from 2 percent during the first three months of the year

Should the Fed add new stimulus, it would likely come in the form of a third round of quantitative easing, a program by which the Federal Reserve purchases government-backed bonds on the open market, including mortgage-backed bonds.

The new-found demand for bonds helps raise their respective prices which, in turn, moves down their respective yields.

“QE3? would push mortgage rates lower, likely. It’s not expected to be released (if at all) until the FOMC’s next scheduled meeting, September 12-13, 2012. There is a small chance it’s announced this Friday, however; the Federal Reserve is meeting in Jackson Hole, Wyoming for its annual retreat.

For this week’s rate shoppers, this week is filled with data and rhetoric. New U.S. housing data will be released along with recent inflation statistics. Both have the ability to cause mortgage rates to rise. In addition, second quarter GDP figures will be revisited and revised. If they’re revised lower, Fed-led stimulus may be more likely.

Lastly, Eurozone leaders reconvene to discuss the terms of Greece’s bailout. If terms are changed for the worse for Greece, mortgage rates may drop in a bout of safe-haven buying.

Home resales climbed 2% last month as the housing market continues its measured, steady recovery.

According to the National Association of REALTORS®, Existing Home Sales rose to 4.47 million units in July on a seasonally-adjusted, annualized basis.

An “existing home” is a home that cannot be classified as new construction and, despite a reduction in the national homes inventory, the number of previously-occupied homes sold in July was higher by 10% as compared to one year ago.

The Existing Home Sales also reported the folliowing :

First-time buyers accounted for 34% of all purchasers, down from 34% in June

Real estate investors accounted for 16% of all purchasers, down from 19% in June

Cash buyers accounted for 27% of all purchasers, down from 29% in June

In addition, the real estate trafde group reports that distressed sales accounted for a smaller percentage of the overall home resale market in July. Just 24% of home resales were for homes in various forms of foreclosure or short sale.

This is down one percent from June, and five percent from July 2011.

It also marks the smallest percentage of homes sold in “distressed” status since the trade group began to track such data 4 years ago.

Lastly, nationwide, the supply of homes for sale dropped to 6.5 months. At the current pace of sales, therefore, the complete U.S. home resale inventory would be sold by the end of Q1 2013.

There are now 2.40 million homes for sale — a 24% reduction from July 2011.

For today’s Phoenix home buyers, the July Existing Home Sales report reinforces the notion that housing is in recovery and what the nation’s home builders have been saying since late-2011 — the next six months for housing will likely be strong. Growth may not be linear, but it figures to be consistent.

With home inventory low and mortgage rates the same, the home resale market looks ripe for good deals.

Mortgage markets worsened for the third straight week last week as the U.S. economy showed new signs of expansion, and as little new news came from Europe.

August has been a rough month for rate shoppers. Since the start of the month, mortgage rates in Mesa have climbed steadily and are now at a 7-week high.

According to Freddie Mac’s weekly Primary Mortgage Market Survey, the 30-year fixed rate mortgage is 3.62% nationwide, on average, for homeowners willing to pay 0.6 discount points plus a full set of closing costs. 1 discount point is equal to one percent of your loan size.

This week, mortgage rates may continue to move higher. There is a bevy of economic data set for publication in addition to the Federal Reserve’s release of its July/August meeting minutes. Mortgage rates are expected to get more bumpy as the week progresses.

No data will be released Monday or Tuesday. During these first two days, expect momentum and sentiment to drive markets. Lately, both have favored “higher rates”.

Then, Wednesday morning, the National Association of REALTORS® releases its July Existing Home Sales report. Strong numbers will likely lead mortgage rates higher. That is, until that day’s 2:00 PM ET release of the Fed Minutes. This will be the week’s big market-mover.

Prior to its last meeting, the FOMC had said economic stimulus would be warranted given certain conditions and Wall Street took that to mean that the Federal Reserve was close to adding new stimulus. When the Fed did not add said stimulus August 1 as expected, mortgage rates rose.

The Fed Minutes will provide insight into some of the debate the shaped the discussion/non-discussion of new stimulus and, depending on what market sees, mortgage rates may rise or fall Wednesday — perhaps by a lot.

Then, on Thursday, the government releases its New Home Sales data for July. This, too, can influence mortgage rates.

If you’re not yet locked on a mortgage, it may be prudent to lock your rate in. Mortgage rates have trended higher this month, and may continue to move in that direction.

According to data from RealtyTrac, a national foreclosure-tracking firm, the number of foreclosure filings dipped below 192,000 in July 2012, a 3 percent decrease from the month prior.

RealtyTrac defines a “foreclosure filing” as any foreclosure-related action, including a Notice of Default, a Scheduled Auction, or a Bank Repossession.

July marks the 22nd straight month during which foreclosure filings fell on a year-over-year basis. At some point soon, however, that streak may end. This is because, for the third straight month, on an annual basis, foreclosures starts are on the rise.

More than 98,000 homes started the foreclosure process in July, a 6 percent increase from July of last year. Connecticut, New Jersey and Pennsylvania experienced the biggest increases, rising 201%, 164% and 139%, respectively.

Each is a judicial foreclosure state, which means that foreclosures must go through the state court system prior to auction.

Nationwide, just a few states accounted for the majority of July’s total foreclosure activity. 5 states were home to more than half of all tracked activity, according to RealtyTrac.

In contrast to the five states above, the bottom 14 states accounted for just 1 percent of the nation’s foreclosure activity, led by North Dakota. In North Dakota, just 3 foreclosure filings were made in July. Other “fewest foreclosure” states in July included District of Columbia (7 filings), Vermont (31 filings), and South Dakota (63 filings).

For home buyers in Phoenix , with more foreclosed properties expected to go for sale this year and next, there will be some excellent “deals” and discounts — foreclosed homes typically sell at discounts of 20% or more as compared to comparable, non-distressed homes. However, foreclosed homes are often sold as-is, which means they may have defects.

Before placing a bid on a foreclosed home, therefore, make sure to have an experienced real estate agent on your side. Buying a foreclosed home may save you money at your closing, but may cost you money longer-term.

As another signal of an improving U.S. economy, the nation’s biggest banks have started to loosen mortgage lending guidelines.

As reported by the Federal Reserve, last quarter, no “big banks” reported stricter mortgage standards as compared to the quarter prior and “modest fractions” of banks reported easier mortgage standards.

The data comes from the Fed’s quarterly Senior Loan Officer Survey, a questionnaire sent to 64 domestic banks and 23 U.S. branches of foreign banks. The survey is meant to gauge, among other things, direct demand for consumer loans and banks’ willingness to meet this demand.

Not surprisingly, as mortgage rates fell to all-time lows last quarter, nearly all responding banks reported an increase in demand for prime residential mortgages where “prime residential mortgage” is defined as a mortgage for an applicant whose credit scores are high; whose payment history is unblemished; and, whose debt-to-income ratios are low.

Consumers were eager to buy homes and/or refinance them last quarter and 6% of the nation’s big banks said their credit standards “eased somewhat” during that time frame. The remaining 94% of big banks said standards were left unchanged.

The ease of getting approved for a home loan, however, is relative.

As compared to 5 years ago, Phoenix home buyers and rate shoppers face a distinctly more challenging mortgage environment. Not only are today’s minimum FICO score requirements higher by up to 100 points, depending on the loan product, applicants face new income scrutiny and must also demonstrate a more clear capacity to make repayments.

Tougher lending standards are among the reasons why the national home ownership rate is at its lowest point since 1997. It is harder to get mortgage-approved today as compared to late-last decade.

For those who apply and succeed, the reward is access to the lowest mortgage rates in a lifetime. Mortgage rates throughout Arizona continue to push home affordability to all-time highs.

If you’ve been shopping for a home, or planning to refinance, with mortgage rates low, it’s a good time to commit.

Mortgage bonds worsened last week in a news- and event-heavy week. A series of non-action from the world’s central banks — including the Federal Reserve — plus a better-than-expected jobs report pushed mortgage rates to their highest levels in more than a month.

Conforming mortgage rates rose in Mesa and nationwide last week.

The week wasn’t without drama, however. Mortgage rates carved out a wide range.

When the week opened, mortgage markets were in a rally mode. The European Central Bank had previously said that it would do whatever was needed to preserve the European Union. However, details failed to emerge on that plan, leading to a “risk off” scenario in which investors moved money into the relative safety of bonds, a class which includes mortgage-backed securities.

Mortgage rates dropped Monday and Tuesday.

Then, Wednesday, beginning at 2:15 PM ET, mortgage rates spiked. The timing coincides with the end of the Federal Open Market Committee’s scheduled 2-day meeting and its statement to the markets. In it, the Fed said it will leave the Fed Funds Rate unchanged in its target range of 0.000-0.250%, and that it will not add new stimulus to the markets or the economy.

Wall Street had expected the Federal Reserve to launch new support for bond markets and, when the Fed chose against it, bond markets sold off, sending mortgage rates higher.

Thursday, mortgage rates, once again, slipped. This occurred after the European Central Bank emerged from a meeting with no clear plan to “save the Euro”. Markets believe the ECB will take some action, but because that action won’t happen right away, investors once more poured into the relative safety of mortgage bonds.

Lastly, on Friday, the U.S. Non-Farm Payrolls report showed 163,000 net new jobs added in July, far exceeding analyst expectations of 100,000 net new jobs. The surprise result sent stock markets soaring and bond markets sinking. The 30-year fixed rate mortgage rose all day, and is now at its highest level in close to 6 weeks.

This week, there isn’t much economic data on which for markets to move so expect to see rhetoric and momentum take center stage. Fed Chairman Ben Bernanke makes two public appearances and Eurozone leaders will continue to be in the news.

If you’re floating a mortgage rate right now, a prudent move may be to lock it.

According to the S&P/Case-Shiller Index, home values rose 2.2% nationwide, with all 20 tracked markets making month-to-month improvement. On an annual basis, 17 of the 20 Case-Shiller Index markets improved.

Despite the positive report, however, our enthusiasm for the May Case-Shiller Index should be tempered. This is because the index’s methodology is less-than-ideal for today’s Scottsdale home buyer.

There are three main reasons why :

The Case-Shiller Index tracks values for single-family homes only

The Case-Shiller Index is distorted by distressed, discounted home sales

The Case-Shiller Index publishes on a 2-month lag

Perhaps even more important, though, is that the Case-Shiller Index ignores a basic tenet of the housing market — all real estate is local. It’s not possible for 20 cities to represent the U.S. housing market as a whole. Even more egregious is that the 20 markets tracked by the Case-Shiller Index don’t represent the country’s twenty most populated cities.

The Case-Shiller Index specifically excludes home sale data from Houston, Philadelphia, San Antonio and San Jose — four of the nation’s 10 most populated cities. Yet, the index does include data from cities such as Minneapolis, Minnesota and Tampa, Florida.

These two cities rank #48 and #55, respectively.

Furthermore, in its 20 tracked cities, the Case-Shiller Index still manages to fail as a reliable housing market barometer. This is because home values vary by zip code, by neighborhood, and by street, even. All 20 Case-Shiller Index cities showed gains in May, but there remains areas within each metropolitan area in which values outpaced the Case-Shiller Index findings, and areas in which values fell short.

The Case-Shiller Index provides broad, generalized housing market data and that works for an economist. For an active home buyer or seller, though, making smart real estate decisions requires having timely, relevant real estate data at-hand when it’s needed.

According to the Federal Home Finance Agency’s Home Price Index, home values rose 0.8% in May on a monthly, seasonally-adjusted basis. May’s reading marks the sixth time in seven months that home values rose.

Values are now higher by 4 percent since the market’s October 2011 bottom.

As a Mesa home buyer or seller, though, it’s important to understand what the Home Price Index measures. Or, more specifically, what the Home Price Index doesn’t measure.

Although widely-cited, the HPI remains widely-flawed, too. It should not be your sole source for real estate data.

As one example of how the Home Price Index is flawed, consider that the HPI only tracks the values of homes with an associated Fannie Mae- or Freddie Mac-backed mortgages. Homes with mortgages insured by the FHA are excluded, as are homes paid for with cash.

5 years ago, this wasn’t a big deal; the FHA insured just 4 percent of the housing market and cash sales were relatively small. Today, though, the FHA is estimated to insure more than 30% of new purchases and cash sales topped 17 percent in May 2012.

That’s a sizable subset of the U.S. housing market.

A second flaw in the Home Price Index is that it tracks home resales only and ignores new home sales. New home sales represent roughly 10% of the today’s housing market, so that’s a second sizable subset excluded from the HPI.

And, lastly, we can’t forget that the Home Price Index is on a 60-day publishing delay.

It’s nearly August, yet we’re only now receiving home valuation data from May. A lot can change in the housing market in 60 days, and it often does. The HPI is not reporting on today’s market conditions, in other words — it’s reporting on conditions as they existed two months ago. Information like that is of little use to today’s buyers and sellers in desert ridge.

For local, up-to-the-minute housing market data, skip the national data. Talk with a local real estate agent instead.

Since peaking in April 2007, the FHFA’s Home Price Index is off 16.0 percent.